Govt directs gas companies to seek commercial loans for LNG infrastructure

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After a heated debate, the Economic Coordination Committee of the Cabinet (ECC) on Thursday directed the state owned gas utility companies to arrange financing from the commercial banks backed by the sovereign guarantee to undertake the massive pipeline infrastructure for imported LNG.

The committee also approved issuance of policy guidelines to NEPRA to reduce the power Rs 3 per unit for the industrial consumers from January 1, 2016 onwards.

The meeting was chaired by the Finance Minister Ishaq Dar. Sources said Dar had heated debate with the OGRA authorities who had opposed financing of LNG infrastructure through expensive commercial loans and recommended using the funds generated through the gas infrastructure development (GIDC) during the last three fiscal years.

Dar was seen on the television screens angrily asking OGRA authorities to tell where was the GIDC amount. It is important to mention the amount was being collected by the Ministry of Finance to undertake the Iran Pakistan gas pipeline project as well as the proposed North South pipeline between Karachi and Lahore.

A statement issued after the meeting said, the ECC on a proposal by Ministry of Petroleum regarding financing of Pipeline Infrastructure Development Plan for the upcoming LNG and anticipated indigenous supplies reaffirmed its decision of 3rd September 2015 allowing gas companies to arrange funding from commercial banks backed by the GoP Sovereign Guarantee.

The committee noted and placed on record the report presented by Secretaries Committee concerning LNG sale and purchase agreement. It may be recalled that the ECC while considering a proposal on 12th January 2016 submitted by the Ministry of Petroleum had approved in principle the recommendations of the Pricing Committee to enter into agreement with Qatar Gas-2.

ECC had also allowed PSO, as buyer to execute the sale and purchase agreement on Government to Government arrangement. Simultaneously the ECC had constituted a committee comprising Secretaries Petroleum, Finance Division, Law and Justice, and Chairman OGRA to examine some related legal and commercial aspects of the proposal. The Committee accordingly prepared and submitted its report.

The meeting on a proposal submitted by the Ministry of Petroleum gave ex-post facto approval in respect of 6 cargoes arranged by PSO from Qatar Gas under Government to Government arrangement on FOB basis on board FSRU as LNG carrier.

On a proposal regarding issuance of policy guidelines to NEPRA for power tariff rationalization, the ECC approved reduction up to Rs 3 per Kwh in existing base tariff for the Industrial consumers of all DISCOs for the year 2015-16, for units consumed from January 1, 2016 onwards.

Finance Minister gave instructions for reconvening ECC meeting on Friday to consider important left over agenda items including provision of salaries to the Pak Steel Mills and supply of wheat to TDPs through the WFP.